FotoFlexer – I’ve found quite a few of these online photo editing tools lately, but this is the best by far in my opinion. It not only does what all the other sites (such as Splashup) do, but also offers many more features and goodies like using Layers and adjusting Levels. Picnik is also a decent editor, which allows you to save to and work directly from your Picasa or Flickr account.
Pixlr – Just found this one and haven’t tried it yet, but wanted to post it right away because of how quick it loaded compared to the others I’ve tried. Many of them still use hefty system resources, so this might be a good choice for those who have slower systems.